Competition watchdog rattles the floor under e-commerce firms

  • Suveen Sinha and Mahua Venkatesh, Hindustan Times, New Delhi
  • Updated: Sep 16, 2015 23:35 IST
A file photo of Competition Commission of India's Chairman, Ashok Chawla (Rak K Raj/HT Photo)

As Flipkart and Snapdeal battle for the bragging rights this festival season, they may find the Competition Commission of India (CCI) in their path waving the red flag over floor price. The result could mean a bigger bonanza for the consumer, who is already seeing an explosion of discounts.

CCI, the fair trade regulator, is looking into the practice of floor price set by online market places for merchants who sell on their platform. Floor price would affect the gross merchandise value (GMV), which is the total value of goods sold on a platform and has become the key metric in valuation of an online market place.

“These platforms are not allowing people to sell below a certain price, which is anti-competitive. You cannot set a floor price. If the prices can go lower, that is well and good,” CCI Chairman Ashok Chawla told HT.

Snapdeal founder and CEO Kunal Bahl said in a recent newspaper interview that his company, going by the GMV, would become India’s largest online marketplace, overtaking Flipkart, by March next year.

Two days later, Mukesh Bansal, Flipkart’s head of commerce, hit back. Nobody, he said, will be even half of Flipkart’s size measured in GMV.

GMV is a much prized data for not only Snapdeal and Flipkart but also all the other online market places — e-commerce platforms that put sellers in touch with buyers for a commission — such as Amazon, Paytm and ShopClues.

Chawla however would not name any of the companies the competition watchdog is looking at. He also has nothing against discounts, which helped e-commerce companies outshine offline retail during last year’s festival season.

This season is certain to see an encore as e-commerce companies have already started advertising, discounting, building logistics, and indulging in a war of words.

“Discounts are over a short period of time. They are marketing techniques and very different from predatory pricing, which is done only by dominant firms over a long period. Predatory pricing, which flows from dominance, is not acceptable. It is done by people with deep pockets, who can sustain losses. Once the other guys are knocked out, the dominant guy raises prices,” said Chawla.

The CCI had recently conducted an investigation to see if online retailers resorted to predatory pricing while offering deep discounts to customers.

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